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| Simon Turner |
An edited version of this interview first appeared in DNA Money edition on Thursday, May 09, 2012.
Global hospitality company Starwood Hotels & Resorts Worldwide Inc currently has more than 7,500 rooms India and quality development pipeline of 5,000 rooms. Simon Turner, president - global development, Starwood Hotels & Resorts Worldwide Inc stressed that while the world as a whole and India within it is experiencing volatility, the hotel company’s strategy is to have a quality hotel development pipeline and not a pipedream. Edited excerpts...
What’s your take on the Indian hospitality market given that things are not really looking very good for the sector?
It is interesting to look at each year and how things have changed. From the overall Starwood perspective, we have been in India since 1973. So we have been in India for a long time and we will be in India for a long time. I think that our perspective on India is that we will stay focused on increasing our footprint. While the world as a whole and India within it will experience volatility, our goal is not to make outrageous growth claims.
Our approach is to have a quality hotel development pipeline and not a pipe-dream. India certainly is a fabulous place to be and is enormously exciting from a macro economic and demographic growth perspective. It is a challenging place to do business and you need to be able to function as a local in this market which is why we have such a strong local team which has been focusing purely on the Indian market.
There will be political and economic challenges in India, most of which will work out on its own. The country’s economic engine is unstoppable, the demographics, social change and the growth of the middle-class will continue.
You think consolidation is seeping into the Indian hospitality market especially with respect to project developments?
When we build hotels, these properties will be operational for the next over a couple of decades or more. I think that while one has to be concerned about the near term economic volatility of the world and in India, what also needs to be understood here is that our owners are investing in hotels for a long-term.
But there is a lot of concern with the developer community. Considering Starwood has a very significant pipeline, is the stress showing on your developments too?
Our development mantra is right properties, right places and right partners. When we look at deals in India the focus is on having the right partner. Associating with quality owners like the The Brigade Group, Oberoi Realty etc. play a crucial role in riding the market volatility cycles. I think what you’ll see happen is as a market gets more and more volatile, some of the most speculative or less experienced developers / owners will reconsider their plans and there may be some consolidation. While I’m confident our development partners will come through it fine they may be also be better positioned to take advantage of the market situation and obtain projects that are in the market.
We have been doing deals in India since 2005, signed 45-50 deals and had to terminate only one agreement because it didn’t happen and in our pipeline today there’s a couple of projects on hold so, out of all may be less than 5 hotels are either kind of on hold or didn’t happen. It is a very low attrition rate if you look at other companies. If you look at the quality of pipeline even today what people have signed, I think a lot of those deals don’t happen, for our competitors, where as ours, we’re are pretty selective and you know sometimes people think we are too selective but I think we really focus on picking the right partner. Hotel development is not 20-20 game but a 5-day test match.
So can we say that the 100 hotels target announced earlier in the year is pretty much on track?
Hundred is our goal in terms of opened or under construction hotels wherein 33 are already operational and another 22 are under construction. We will get to the India-100 aspiration and it is not a matter of if, it’s a when. What we’re doing is we’re spreading up our organisation and investing in the Starwood infrastructure in the form of having a call center in India that is primarily focusing only on our Indian hotels and largely the domestic traffic which is an enormously important part of that business.
Our Indian team would be be the largest in-country team when compared to teams of all the global hotel companies operating in India. What we want to be able to do for our owners is to provide them with the necessary level of support in advance of the hotel’s opening and it fundamentally means having people who know the Starwood systems, the hotels, know the owners, know all the customers in the market and it’s an overused phrase but I think one of the thing we pride ourselves on is we truly are a global company functioning locally.
Starwood is the only hotel company that is yet to take equity positions in India. What are the possibilities of it happening in the near future?
I don’t know the details of equity announcements made by other hotel groups. I think we as an industry sometimes tend to get over excited about making big announcements that eventually get splashed across the media. But if you go back a few years, there were a couple of very large announcements between global brands and local Indian investors saying we’ll do over 50 hotels and then a few years on the fizz just sort of goes away.
Running global brands, creating multilingual web pages, setting up a customer call centre, investing in infrastructure for over 100 people in the country and having a loyalty program that makes sure the Starwood Preferred Guest (SPG) clientele is loyal beyond reason is also an investment of a different kind. What we’ve focused on is doing a limited number of things really well. Having great distinctive 9 brands and making them as appealing as we possibly can to guests to costumers to owners is what we’re focusing on. Investing in technology to put heads in beds is enormous.
We think the property investment that our owners make is so specialised and requires such local knowledge that we don’t think that’s where we should be. Now, we also haven’t found it necessary to invest capital in the real estate in order to support our growth, because the property owners want to be able to harness what Starwood does best. I think we have the financial flexibility to be open to investing but it’s not something that’s a requirement for us to achieve our growth goals.
One of the things that we have found is the owners that we work with are well capitalised and one of the great things about capitalism is that if there’s and opportunity if all these rooms are a good investment, money will find its way to those rooms.
With new development control rules (DCR) in Mumbai, will it lead to changes for the upcoming W hotel in Mumbai?
There was a review which is now complete. We did not lose much because it was pretty much built around the parameter that they have. So the size of the hotel still remains the same. Certain areas, public areas might be cut back, but nothing major.
Are you considering a budget hotel brand given the excitement around that category of hotels in India?
We are not looking at that segment. Focusing on the existing 9 brands and doing whatever we can to make them as value added as possible to the owners is priority. We haven’t wandered into the budget space and if we ever decide to go in that direction, we will do it all for a great deal of thought and consideration and deliberation but at the moment, that’s not where we are.
How is your association with ITC progressing?
We have a long standing relationship with ITC. We have huge respect for them as an organisation and I think the way we look at our relationship with them, it’s a 1 plus 1 equals 3. I think we bring things to the table, they bring things to the table, and we’ve got such a long standing deep relationship between the 2 organizations that it’s an unusual relationship but it works. And I think one of those things we pride ourselves of as a company is being both pragmatic and flexible and I think again we hold them with such high regard that we figured out a way to make it work with both parties.
You had an association with Lavasa which was later terminated. Any plans to re-enter that location?
We didn’t have anything signed there. We were in discussions with Lavasa for Sheraton but that didn’t materialise. But yes, they have got good clients for leisure as well as education and for the right opportunity, why not. At the moment, I think the upscale brands have gone in. There is a Fortune and a Novotel and I think there is a golf course opening up too besides other plans that are part of the master development. I think there will be a lot more interest from a lot more hotel companies.
Global hospitality company Starwood Hotels & Resorts Worldwide Inc currently has more than 7,500 rooms India and quality development pipeline of 5,000 rooms. Simon Turner, president - global development, Starwood Hotels & Resorts Worldwide Inc stressed that while the world as a whole and India within it is experiencing volatility, the hotel company’s strategy is to have a quality hotel development pipeline and not a pipedream. Edited excerpts...
What’s your take on the Indian hospitality market given that things are not really looking very good for the sector?
It is interesting to look at each year and how things have changed. From the overall Starwood perspective, we have been in India since 1973. So we have been in India for a long time and we will be in India for a long time. I think that our perspective on India is that we will stay focused on increasing our footprint. While the world as a whole and India within it will experience volatility, our goal is not to make outrageous growth claims.
Our approach is to have a quality hotel development pipeline and not a pipe-dream. India certainly is a fabulous place to be and is enormously exciting from a macro economic and demographic growth perspective. It is a challenging place to do business and you need to be able to function as a local in this market which is why we have such a strong local team which has been focusing purely on the Indian market.
There will be political and economic challenges in India, most of which will work out on its own. The country’s economic engine is unstoppable, the demographics, social change and the growth of the middle-class will continue.
You think consolidation is seeping into the Indian hospitality market especially with respect to project developments?
When we build hotels, these properties will be operational for the next over a couple of decades or more. I think that while one has to be concerned about the near term economic volatility of the world and in India, what also needs to be understood here is that our owners are investing in hotels for a long-term.
But there is a lot of concern with the developer community. Considering Starwood has a very significant pipeline, is the stress showing on your developments too?
Our development mantra is right properties, right places and right partners. When we look at deals in India the focus is on having the right partner. Associating with quality owners like the The Brigade Group, Oberoi Realty etc. play a crucial role in riding the market volatility cycles. I think what you’ll see happen is as a market gets more and more volatile, some of the most speculative or less experienced developers / owners will reconsider their plans and there may be some consolidation. While I’m confident our development partners will come through it fine they may be also be better positioned to take advantage of the market situation and obtain projects that are in the market.
We have been doing deals in India since 2005, signed 45-50 deals and had to terminate only one agreement because it didn’t happen and in our pipeline today there’s a couple of projects on hold so, out of all may be less than 5 hotels are either kind of on hold or didn’t happen. It is a very low attrition rate if you look at other companies. If you look at the quality of pipeline even today what people have signed, I think a lot of those deals don’t happen, for our competitors, where as ours, we’re are pretty selective and you know sometimes people think we are too selective but I think we really focus on picking the right partner. Hotel development is not 20-20 game but a 5-day test match.
So can we say that the 100 hotels target announced earlier in the year is pretty much on track?
Hundred is our goal in terms of opened or under construction hotels wherein 33 are already operational and another 22 are under construction. We will get to the India-100 aspiration and it is not a matter of if, it’s a when. What we’re doing is we’re spreading up our organisation and investing in the Starwood infrastructure in the form of having a call center in India that is primarily focusing only on our Indian hotels and largely the domestic traffic which is an enormously important part of that business.
Our Indian team would be be the largest in-country team when compared to teams of all the global hotel companies operating in India. What we want to be able to do for our owners is to provide them with the necessary level of support in advance of the hotel’s opening and it fundamentally means having people who know the Starwood systems, the hotels, know the owners, know all the customers in the market and it’s an overused phrase but I think one of the thing we pride ourselves on is we truly are a global company functioning locally.
Starwood is the only hotel company that is yet to take equity positions in India. What are the possibilities of it happening in the near future?
I don’t know the details of equity announcements made by other hotel groups. I think we as an industry sometimes tend to get over excited about making big announcements that eventually get splashed across the media. But if you go back a few years, there were a couple of very large announcements between global brands and local Indian investors saying we’ll do over 50 hotels and then a few years on the fizz just sort of goes away.
Running global brands, creating multilingual web pages, setting up a customer call centre, investing in infrastructure for over 100 people in the country and having a loyalty program that makes sure the Starwood Preferred Guest (SPG) clientele is loyal beyond reason is also an investment of a different kind. What we’ve focused on is doing a limited number of things really well. Having great distinctive 9 brands and making them as appealing as we possibly can to guests to costumers to owners is what we’re focusing on. Investing in technology to put heads in beds is enormous.
We think the property investment that our owners make is so specialised and requires such local knowledge that we don’t think that’s where we should be. Now, we also haven’t found it necessary to invest capital in the real estate in order to support our growth, because the property owners want to be able to harness what Starwood does best. I think we have the financial flexibility to be open to investing but it’s not something that’s a requirement for us to achieve our growth goals.
One of the things that we have found is the owners that we work with are well capitalised and one of the great things about capitalism is that if there’s and opportunity if all these rooms are a good investment, money will find its way to those rooms.
With new development control rules (DCR) in Mumbai, will it lead to changes for the upcoming W hotel in Mumbai?
There was a review which is now complete. We did not lose much because it was pretty much built around the parameter that they have. So the size of the hotel still remains the same. Certain areas, public areas might be cut back, but nothing major.
Are you considering a budget hotel brand given the excitement around that category of hotels in India?
We are not looking at that segment. Focusing on the existing 9 brands and doing whatever we can to make them as value added as possible to the owners is priority. We haven’t wandered into the budget space and if we ever decide to go in that direction, we will do it all for a great deal of thought and consideration and deliberation but at the moment, that’s not where we are.
How is your association with ITC progressing?
We have a long standing relationship with ITC. We have huge respect for them as an organisation and I think the way we look at our relationship with them, it’s a 1 plus 1 equals 3. I think we bring things to the table, they bring things to the table, and we’ve got such a long standing deep relationship between the 2 organizations that it’s an unusual relationship but it works. And I think one of those things we pride ourselves of as a company is being both pragmatic and flexible and I think again we hold them with such high regard that we figured out a way to make it work with both parties.
You had an association with Lavasa which was later terminated. Any plans to re-enter that location?
We didn’t have anything signed there. We were in discussions with Lavasa for Sheraton but that didn’t materialise. But yes, they have got good clients for leisure as well as education and for the right opportunity, why not. At the moment, I think the upscale brands have gone in. There is a Fortune and a Novotel and I think there is a golf course opening up too besides other plans that are part of the master development. I think there will be a lot more interest from a lot more hotel companies.
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